Delay on health law aids businesses in South Dakota

But employers say uncertainty about insurance remains

Jul. 4, 2013

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South Dakota employers are relieved the government is delaying by one year the penalties businesses face for having uninsured workers but said the reprieve does not clear up concerns that the new regulations are too complicated and costly.

“That’s really good news. It’s one less decision I have to make tomorrow,” said Jean Hoesing, general manager at the Ramada Inn on Russell Street in Sioux Falls.

Businesses with more than 50 employees were to face penalties starting at $2,000 per uninsured worker if they did not have acceptable health coverage available by January 2014, as required by the Affordable Care Act of 2010.

The White House announced Tuesday that it was pushing the deadline back 12 months to January 2015 amid confusion over the issue.

“We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively,” Mark Mazur, assistant secretary for tax policy at the U.S. Department of the Treasury, said in an Internet posting.

“We have listened to your feedback. And we are taking action,” Mazur said.

Business leaders said Wednesday that the delay was inevitable.

“This can’t be surprising. ... I’ve been doing public policy for 30 years, and I’ve not seen this big a change this ill-defined this close to the deadline,” said David Owen, president of the South Dakota Chamber of Commerce and Industry.

The one-year reprieve is only for businesses.

Individuals still must have insurance by 2014 or face a penalty that in the first three years would increase from $95 to $350 to $750.

The deadlines do not directly affect most South Dakotans, as 91 percent of the population has coverage through employer group plans, individual policies, Medicare or Medicaid.

The other 9 percent, representing 71,000 uninsured people across the state, still must find coverage by Jan. 1. The new law creates online marketplaces called insurance exchanges to help them find coverage, often at subsidized rates. But another option for them was to be coverage that their employers would be required to offer at their workplace. That requirement for employers now is delayed to one year after the employees are required to have the insurance.

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It’s a confusing set of rules, Owen said.

“The question still is how this works, what we have to pay and what are the options?” Owen said. “This is before the question of whether the law is good or bad. It’s just in terms of whether we’re going to be able to understand it.”

Cathy McLeer, associate state director for AARP South Dakota, an organization that supports the Affordable Care Act, said the new law’s benefits outweigh the challenges that come with the startup. The law in its first three years has expanded coverage for children and young adults. It has provided free preventive health screenings for 58,000 South Dakotans on Medicare and saved 3,300 participants in the Medicare part D drug program $2 million, she said.

“Yes, it’s very complicated and, yes, it’s going to take time to implement it and figure it out. The bottom line is real people in South Dakota are benefiting from provisions already in place,” she said.

The law is set up to use the money from uninsured people entering the insurance marketplace as revenue to pay for other parts of health care reform.

Many of the uninsured work for businesses that offer coverage, but they choose not to buy it. Under the new law, those businesses would be on the hook to pick up part of the cost if their uninsured workers do sign up for coverage.

Tom Walsh, CEO of Dakota King, has 1,100 employees at 37 Burger King restaurants in three states. About 90 percent of his managers and 50 percent of his hourly employees enroll in the company’s group insurance plan by contributing part of their paycheck. It’s always been a personal decision.

“Now it isn’t a matter of people choosing. Now we must offer it to people who haven’t wanted insurance. A lot of young people we employ are more interested in cash than some of the benefits,” he said.

Walsh foresees those uninsured workers now being forced to buy in, paying part of the cost with the company paying the rest. He expects that new expense will cost him $20,000 to $30,000 per restaurant per year, or $750,000 to $1 million annually.

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He does not expect the new system to work.

“Tell me what the government has run well,” he said.

Hoesing has 70 employees at the Ramada Inn, many of whom do not buy the insurance coverage the hotel offers.

“It’s offered, but they don’t find it affordable now. We pay 50 percent, and we’ll probably have to go to 60 percent. But that still won’t be enough for somebody who makes $10 to $12 an hour and is a single parent,” she said.

Insurance coverage at the Ramada now costs the employee about $225 a month with the employer matching that with another $225. Under the law, an employee making $12 an hour would be eligible for a discounted rate, pushing the employer’s share closer to $250 or $300 a month.

“Putting the burden on the employer to ensure that employees are covered is hard. They’re not going to be able to afford it, and if we don’t offer it so it is affordable, we get penalized,” Hoesing said.

But now the employer obligation is delayed a year.

“Nothing is in black and white. It changes daily,” Hoesing said.

Valerie Jarrett, a senior adviser to President Obama, said in a blog posting that the administration is working to simplify the rules. She said businesses with fewer than 50 employees might be eligible for subsidies to provide coverage. Businesses with more than 50 full-time workers and already offering high-quality insurance are in good shape, she said. “We’ll work with you to keep that coverage affordable,” she said. Others now have an additional year of transition to arrange coverage.